“By their failing to put in place proper safeguards, Zelle became a gold mine for fraudsters, while often leaving victims to fend for themselves,” said CFPB Director Rohit Chopra in a statement Friday. 

A Zelle spokesperson said the CFPB’s lawsuit is legally and factually flawed while a representative for JPMorgan called them “a last-ditch effort in pursuit of their political agenda.” Bank of America said more than 99.95% of transactions go through without issue and it strongly disagreed with the agency’s move.

A representative for Wells Fargo declined to comment.

JPMorgan, Wells Fargo and Bank of America are the largest institutions participating in the Zelle network, according to the complaint, accounting for 73% of its activity last year. 

The CFPB claimed that fraud complaints weren’t addressed, with consumers largely denied relief when they went to their banks, according to the federal lawsuit filed in Arizona.

Both JPMorgan and Wells Fargo previously disclosed that the consumer agency was investigating their handling of Zelle transactions, which the banks rely on to encourage customers to engage with them more online. JPMorgan also said earlier this year it was evaluating its response to the government scrutiny, including potential litigation.

Increasingly Popular

Consumer payment scams via Zelle have come under scrutiny from US lawmakers as peer-to-peer payment platforms have risen in popularity. The company said in October that transactions increased 27% during the first half of 2024, with payments totaling almost $500 billion. 

The Bank Policy Institute said Zelle is safer than Block Inc.-owned Cash App and PayPal Holdings Inc.-owned Venmo, two of the most popular payment apps in the US. The group criticized the agency’s action and said its research showed disputed transactions on PayPal are three times higher than transactions on Zelle, while disputes on Cash App are six times higher.

The competitive pressure of peer-to-peer payment systems, the CFPB alleges in the suit, pushed the banks to quickly bring Zelle online to leverage their existing customer base. Once problems arose, the agency claims the banks didn’t address them for years. 

The mounting complaints added up to fraud losses of around $870 million spread among the three banks, according to the CFPB. 

Focused Action

Early Warning Services, the company that operates Zelle, is owned by seven of the largest US banks: the three named in the lawsuit as well as Capital One Financial Corp., PNC Financial Services Group Inc., Truist Financial Corp. and US Bancorp. 

The CFPB didn’t target the other owner banks in its lawsuit, but agency officials told reporters that all seven of the owner banks play a role in establishing Zelle policies and procedures. 

(Updates with additional background and context throughout, adds comment from banks)